Multifamily Loans offer Investors an excellent opportunity to expand their Real Estate Portfolio beyond Single Family Properties. However, it’s essential to understand the different types of Loans available and choose the one that suits your personal Investment goals and Financial strategy.
Multifamily Loans can be used to secure funding for Purchasing, Refinancing, Developing, or Rehabilitating a Multifamily Property. Multifamily Loans come in many different forms and fashions, which can be classified based on the Loan’s purpose or performance. Some of the Financing types available include Bridge Loans, Construction Loans, Permanent Financing Loans, or Mezzanine style Loans. However, not all these options will suit every Investor’s situation. Bridge Loans are ideal for short-term funding needs when Investors need to acquire a Multifamily Property quickly. On the other hand, Construction Loans are suitable for Financing New Construction and Rehab Loans are for Renovation Projects. Permanent Financing Loans (Purchase and Refinance Loans) are Long-Term Financing options that are suitable for stabilized Multifamily Properties, while Mezzanine Loans are used to “bridge the gap” between a Property’s Primary Loan and the Equity contribution from the Borrower.
THE FINE PRINT…
When it comes to Multi Family Loans, the maximum Loan-to-Value (LTV) is typically 80%. Construction Loans usually go up to 3 years, while longer-term Permanent Financing Loans may extend for up to 30 years. Additionally, the maximum amortization period for these Loans is also 30 years. Prepayment Penalties are also a standard component of Long Term Multi Family Loans and they come in two forms: Step-Down or Yield Maintenance. At present, Step-Down Penalties are considered more lenient than Yield Maintenance Penalties. Determining the best Interest Rate for a Multi Family Loan requires an assessment of the Borrower’s experience, personal Credit standings, and Financial position, as well as the Property’s Financial position and performance. A Personal Financial Statement is extremely helpful for giving a “screenshot” of your personal Finances.
FULL RECOURSE LOANS:
• Income and Expense Report for the trailing 12 months, plus year-end statements for last year
• Current Credit Report for ALL Borrowers
• Profit and Loss Statement for the past 12 months
• Personal Financial Statement (PFS) (within 90 days)
• REO schedule – which is a schedule of all Real Estate Owned.
• Specific Property details, where any tenant concentrations should be noted, such as sec 8, short-term leases vs 12-month leases, military, student, etc.
• Rent roll – (including unit number, floor plan (bed/bath), unit lease status, name, lease start date, lease end date, M2M (if any), market rent, current lease Rate, any other charges or credits, total billing, deposit, and balance.)
MULTI FAMILY LOAN OPTIONS:
PURCHASE
REFINANCE
REHAB
CONSTRUCTION
BRIDGE
MEZZANINE